Issuer officials who said Treasury's final issue price rules are a vast improvement over earlier proposals nevertheless raised concern that they might discourage competitive sales of bonds or create problems for issuers if underwriters run afoul of the rules.

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SAN FRANCISCO - California has issued an insurance license to Berkshire Hathaway Assurance Corp., giving Warren Buffett's new bond insurance venture an entrée into the nation's largest single market.

The state's insurance department said it expedited the BHAC license because of the turmoil roiling the monoline bond insurance industry, which was exemplified Friday when Standard & Poor's downgraded Financial Guaranty Insurance Co. six notches to BB from A.

"In our opinion, FGIC has been slow to identify the unfavorable insured portfolio trends that have emerged and has failed to implement a strategic plan to re-establish itself as a viable operating entity capable of writing new business," according to the news release Standard & Poor's issued Friday.

"While we are disappointed with [Standard & Poor's] decision, we intend to move forward with plans to address their concerns and restore FGIC's business franchise," said Brian S. Moore, senior vice president of investor relations at FGIC.

Moore confirmed that the company reduced its staff by approximately 20 positions last week. "The action was taken to more closely align our cost structure with the current business environment," he said in a statement.

Meanwhile, California insurance commissioner Steve Poizner said in a news release Thursday that he was pleased to be able to expedite Berkshire's application. "California was starting to experience a capacity issue for bond insurers, so BHAC is a very welcome entrant to our marketplace."

Through a spokeswoman, BHAC declined to comment on the news Friday.

According to the insurance department, BHAC's application was processed and approved in less than 30 business days, though state law gives the department 180 days to review applications for licensure from new insurers requesting authority to do business in California.

In this case, the insurance department said it acted swiftly because of the turmoil in the monoline bond insurance market, which has seen the triple-A credit ratings of many insurers either downgraded or threatened by their exposure to potential losses from investments like collateralized debt obligations.

Though BHAC does not have its own triple-A rating, its guarantees are backed by Berkshire-owned National Indemnity Co., which does have its own triple-A credit rating, the department said.

In addition to downgrading FGIC, Standard & Poor's suspended its ratings on public finance and corporate transactions insured by FGIC that do not have an underlying public rating. Standard & Poor's removed FGIC's ratings from CreditWatch with negative implications, but assigned a negative outlook.

Also on Friday, Moody's Investors Service changed its rating outlook for Radian Asset Assurance Inc. to negative from stable, though it affirmed its Aa3 rating.

The affirmation reflects Moody's updated assessment of Radian Asset's risk adjusted capitalization, the rating agency said. The negative outlook reflects "the risk of deterioration in Radian Asset's business prospects and uncertainty regarding its future strategic direction," according to Moody's.

Also on Friday, Fitch Ratings issued guidelines to clarify the rating impacts from two downgrades last week, in which it lowered FGIC to BBB from AA and XL Capital Assurance to BB from A.

Those insurer downgrades involved bonds with more than 22,000 different Cusip numbers. Fitch said those with underlying Fitch ratings equal to or higher than the insurers' ratings will carry the underlying ratings. Those that lack a Fitch underlying rating would "at this time" keep their insured ratings - a AA rating on negative watch for FGIC-wrapped bonds an A rating on negative watch and for XLCA-insured bonds.

Despite its California license, Berkshire Hathaway may not get business from the state's - and nation's - largest issuer, the California state government.

State Treasurer Bill Lockyerlast week said that he was not inclined to do business with the firm unless it backed away from comments that BHAC chairman Ajit Jain made to a congressional committee last month supporting the existing municipal credit rating system.

Lockyer is leading efforts to change the credit rating system, which he says unfairly penalizes municipal bond issuers and taxpayers by holding them to higher standards than for corporate bond ratings.

Even without the state government, California's municipal bond market - with more than $66 billion issued in 2007 through more than 1,000 bond issues - could represent a substantial opportunity.

As of last Thursday, more than $12 billion of long-term debt had been issued in California during 2008, and only 22% of that volume carried bond insurance, according to Thomson Financial data.

Financial Security AssuranceInc. was credited with more than 62% of the insured volume, with Assured Guaranty taking less than 14%, Ambac Assurance Corp. just over 5%, and Radian credited with one $3.7 million transaction.